Role of Agriculture in the Indian Economy

ROLE OF AGRICULTURE IN THE INDIAN ECONOMY

Over the years 1921 -91, the size of labour force dependent on agriculture had more than doubled and over the next decade is projected to going by more than 25 per cent. This is contrary to the development economists’ observation that as country develops the share of labour force dependent upon agriculture as a source of livelihood declines. The occupational structure of the country has shown a lack of flexibility, the large proportion of the increasing labour force, in the absence of any alternative employment opportunities, has been absorbed in agriculture. It is observed that while the share of agriculture in GDP has been declined significantly, its share in the manufacturing sector has gone up. However, corresponding to this structural shift in production, the structure of employment has shown little change.

Since agriculture contributes significantly in the National Income, this sector is treated as major source of savings and hence capital formation for the economy. The pace of development is largely conditioned by the rate of capital formation in the economy. Since independence, large investment, both public and private, has been made in agriculture. In areas where agricultural practices are traditional, investment has also been on traditional lines like land and its improvement, tools and implements, farm structures, etc. But the pailern of investment in progressive areas, where modern technology has been adopted, has been predominantly in irrigation, land improvements, farm machinery and other infrastructures. Of course in recent years public investment in agriculture sector has declined. To stimulate growth, substantial capital investments are required for various infrastructure and inputs.

Evaluation of Monopolistic Competition

EVALUATION OF MONOPOLISTIC COMPETITION

Merits

1. An important merit of monopolistic competition is that it is much closer to reality than several other models of market structure. Firstly, it incorporates the facts of product differentiation and selling costs. Secondly, it can be easily used for the analysis of duopoly and oligopoly.

2. Under monopolistic competition it is possible to see that even when each individual firm produces under conditions of increasing returns, not only the firm under consideration but the entire group of firms can be in equilibrium.

3. Moreover, monopolistic competition is able to show that even when each individual firm is producing under increasing returns, it still earns only normal profit in the long run.

Demerits

1. The biggest conceptual difficulty with monopolistic competition is the concept of a ‘group’ of firms. There is no standard theoretical foundation for deciding the boundaries of a group.

2. Related with the concept of a group of firms, who face the difficulty of defining the meaning of a ‘close substitute’. We are not told at what values of cross elasticity, two products become close substitutes of each other.

The theory of monopolistic competition fails to take into account the fact that the demand by final consumers is largely influenced by the retail dealers because the consumers themselves are not fully aware of the technical qualities of the product.

 

Salient features of the Monopolistic Competition

(a) The first feature of monopolistic competition, as mentioned above, is product differentiation. A buyer can get a specific type of the ‘product’ only from one final source (may be, through the dealers and sub-dealers, etc.).

(b) Product differentiation necessitates incurring of selling expenses on the part of firms under market structure of monopolistic competition.

(c) Monopolistic competition is characterised by a large number of sellers. The demand and supply conditions of these sellers are inter-dependent.However, in spite of their large number, no individual seller becomes a price taker. He has the authority to demand a price of his choice, though he also

Definition of Monopolistic Competition

MONOPOLISTIC COMPETITION

A monopolistic competition is defined as that market structure in which each seller produces a ‘differentiated product’. The concept of product differentiation means that the product marketed by one seller can be distinguished from the products marketed by other sellers in some form or other. Some of the important methods of product differentiation include trade marks, brand names, size, packing, or colour etc. of the item, and technical specifications, etc.

Thus, in this market structure, each seller is a monopolist of his differentiated product. The buyers can get it only from him and from none else. At the same time, however, the products offered by different sellers are close substitutes of each other. The buyers are always comparing the prices of their products together with the perceived ‘quality’ of each. In other words, there is also an intense competition between suppliers for a share in the market. For this reason, it is a market structure in which there is a competition between a group of firms while each firm is a monopolist of its own product. It is, therefore, termed as monopolistic competition. 

Definition of Monopoly

MONOPOLY

The term monopoly means a single seller. In economics, this term refers to a firm the product of which has no close substitute in the market. It is, in that sense, a single-firm industry. Moreover, irrespective of the profit income of the existing producer firm, new firms cannot enter the industry. Hurdles to their entry may be on account of various reasons. There may be legal barriers, or the producer may own a technology or a naturally occurring substance which others cannot avail of. It is also possible that the size of the market may be too small and no new firm may find it economically worthwhile to enter it.

In the absence of a substitute product, the monopolist is free to fix a price of his choice. He can refuse to sell his product for a price below the one decided by him. However, he cannot determine the demand for his product. He cannot force the buyers to buy his product at a price of his choice. A buyer will buy it only if its price does not exceed its marginal utility to him. Therefore, if the monopolist wants to increase his sales, he has to reduce theprice of his product so as to induce

Paul A. Samuelson – Definition of Economics

Science of dynamic growth and development. Although the fundamental economic problem of scarcity in relation to needs is jjsi.ted it would not be proper to think that economic resources – physical, human, financial are fixed and cannot be increased by human ingenuity, exploration, exploitation and development. A modern and somewhat modified definition is as follows

“Economics is the study of how men and society choose, with or without the use of money, to employ scarce productive resources which could have alternative uses, to produce various commodities over time and distribute them for consumption now and in the future amongst various people and groups of society”.

Paul A. Samuelson

The above definition is very comprehensive because it does not restrict to material well-being or money measure as a limiting factor. But it considers economic growth over time.

Micro and Macro-Economics

Micro and Macro-Economics

The subject-matter of Economics has been divided into two parts – Micro-Economics arid Macro Economics. In Micro-Economics we study the economic behaviour of an individual, Firm or industry in the national economy. It is thus a study of a particular unit rather than all the units combined. We mainly study the following in Micro-Economics

(i) product pricing;

(ii) consumer behaviour;

(iii) factor pricing;

(iv) economic conditions of a section of the people;

(v) study of firms; and

(vi) location of a industry.